EFCO Corp. v. Norman Highway Constructors, Inc.

• Decision Date: 20 January 2000
• Docket Number: No. 98-194.,98-194.
• Parties: EFCO CORP. f/k/a Economy Forms Corporation, Appellee, v. NORMAN HIGHWAY CONSTRUCTORS, INC., Appellant.
• Court: Iowa Supreme Court

606 N.W.2d 297

EFCO CORP. f/k/a Economy Forms Corporation, Appellee, v. NORMAN HIGHWAY CONSTRUCTORS, INC., Appellant.

No. 98-194.

Supreme Court of Iowa.

January 20, 2000.

Rehearing denied March 13, 2000.¹

Rod Powell of Powell Law Firm, P.C., Norwalk, for appellant. David L. Charles and David K. Basler of Belin Lamson McCormick Zumbach Flynn, A P.C., Des Moines, for appellee.

Considered by McGIVERIN, C.J., CARTER, NEUMAN, and CADY, JJ., and HARRIS,² S.J.

CARTER, Justice.

Defendant, Norman Highway Constructors, Inc. (Norman), appeals from an adverse judgment in favor of plaintiff, EFCO Corp. (formerly known as Economy Forms Corporation) (EFCO), entered following a jury trial. The action sought recovery of payments allegedly owed for the leasing of concrete forming equipment used in a construction project in Texas. Norman filed a counterclaim alleging several theories of recovery. Norman contends the district court erred in (1) exercising in personam jurisdiction over this Texas corporation, (2) failing to instruct the jury on a theory of negligent misrepresentation urged in its counterclaim, and (3) failing to deny EFCO's claim for attorney fees and expenses. After reviewing the record and considering the arguments presented, we affirm the judgment of the district court.

On November 16, 1995, Norman entered into a written contract with EFCO for the lease of concrete forming equipment. Norman agreed to pay a certain sum as rental and, pursuant to the written agreement, those payments were to be made to EFCO in the State of Iowa. A dispute later arose between EFCO and Norman with respect to how much Norman owed EFCO under the contract. On April 3, 1997, Norman commenced an action against EFCO in a Texas court alleging fraud, breach of contract, and breach of express and implied warranties by EFCO. One and a half hours after Norman's suit was filed, EFCO filed an action against it in the Iowa District Court to recover for lease payments allegedly due and unpaid.

Norman moved to dismiss EFCO's action on the basis that the Iowa court lacked in personam jurisdiction over this foreign corporation. It also sought, as an alternative remedy, an order of the Iowa court abating the Iowa action in deference to Norman's pursuit of its action in Texas. The district court upheld the in personam jurisdiction of this state's courts based on a choice-of-forum agreement contained in the contract. In addition, it refused to abate the Iowa action until the Texas suit had been concluded.

Norman counterclaimed against EFCO, alleging breach of express and implied warranties, fraud, and negligent misrepresentation. At the trial of all claims presented, Norman withdrew its claims of breach of express and implied warranty. The court dismissed Norman's negligent-misrepresentation claim on the basis that EFCO was not in the business of providing information. The jury rejected Norman's fraud claim and found in favor of EFCO with respect to its claim for unpaid lease payments for the concrete-forming equipment. Judgment was entered in EFCO's favor for the sum of $96,916. Later, the court added an additional $14,816 to the judgment as reimbursement for EFCO's attorney fees and litigation expenses. Other facts that bear upon our decision will be considered in our discussion of the legal issues presented.

I. The Challenge to the In Personam Jurisdiction of the Iowa Court.

Norman urges that the Iowa court lacked in personam jurisdiction over it because it is a Texas corporation not doing business in this state and lacking the requisite minimum contacts to satisfy the due process considerations relevant to personal jurisdiction under the Fourteenth Amendment to the Federal Constitution. It also urges that in personam jurisdiction may not be exercised over this Texas corporation because no statute exists to authorize the court's assumption of jurisdiction. In support of these contentions, Norman relies on the two-step analysis that this court applied in Martin v. Ju-Li Corp., 332 N.W.2d 871, 874 (Iowa 1983), and Larsen v. Scholl, 296 N.W.2d 785, 787 (Iowa 1980), requiring a determination of (1) whether a statute authorizes assumption of jurisdiction over the nonresident defendant, and (2) whether the nonresident defendant has the requisite minimum contacts such that the exercise of jurisdiction meets the requirements of due process. Martin, 332 N.W.2d at 874. In support of the latter contention, Norman points out that EFCO solicited the lease agreement in Texas through the efforts of employees of EFCO's office in Texas. All of the leased equipment was at all times located in Texas, and Norman was advised to contact the Texas regional office of EFCO with respect to all dealings with the company other than tender of the lease payments, which were to be made in Iowa.

We find that neither elements of the two-step analysis suggested in Martin and Larsen need be applied in our review of the present action because the basis for the district court's assumption of in personam jurisdiction was consent. The district court relied on a choice-of-forum clause in the contract between the parties that provided:

Any action in regard to this agreement or arising out of its terms and conditions may be instituted and litigated in the Iowa District Court for Polk County, Iowa. Customer consents to the jurisdiction of such court and agrees that service of process as provided by the statutes and rules of procedure of Iowa ... shall be sufficient.

With respect to the due process implications of choice-of-forum clauses, the Supreme Court has held that "it is settled... that parties to a contract may agree in advance to submit to the jurisdiction of a given court, to permit notice to be served by the opposing party, or even to waive notice altogether." National Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-16, 84 S.Ct. 411, 414, 11 L.Ed.2d 354, 358 (1964). The basis for this conclusion is explained as follows in Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982):

The requirement that a court have personal jurisdiction flows not from [limitation on a court's power], but from the Due Process Clause. The personal jurisdiction requirement recognizes and protects an individual liberty interest. It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty . .

Because the requirement of personal jurisdiction represents first of all an individual right, it can, like other such rights, be waived.

Insurance Corp. of Ireland, 456 U.S. at 702-03, 102 S.Ct. at 2104-05, 72 L.Ed.2d at 501-02 (citations omitted).

Norman urges that this court has categorically rejected the application of choice-of-forum clauses in Davenport Machine & Foundry Co. v. Adolph Coors Co., 314 N.W.2d 432 (Iowa 1982). Our reading of that decision suggests that our disapproval of such clauses was only with respect to a denial of personal jurisdiction to a court that clearly had jurisdiction based on the activities of the defendant. We made that clear by stating the issue as follows:

The issue [was] not whether courts in [the state chosen in the contract] had jurisdiction under the clause; it [was] whether the clause [deprived] other courts of jurisdiction they would otherwise possess.

Davenport Mach. & Foundry Co.,314 N.W.2d at 435. This is not a case in which a choice-of-forum clause has been used to deprive a court of jurisdiction that it otherwise has. It is a case of consent to jurisdiction. Such consent has long been recognized under Iowa law. Joseph L. Wilmotte & Co. v. Rosenman Bros., 258 N.W.2d 317, 329 (Iowa 1977); Oakes v. Oakes, 255 Iowa 1315, 1318, 125 N.W.2d 835, 838 (1964).

Norman seeks to avoid the consequences of the choice-of-forum clause by asserting that this provision of the agreement was a contract of adhesion. In support of this claim, it urges that the clause in question was contained on the reverse side of the form contract on which no signature lines appeared. In addition, the officer of the company executing the agreement testified that he had not read the choice-of-forum clause. We believe that...